In most organisations, performance management is a waste of time and resources. Whilst most organisations claim to use some form of performance management systems very few have realised the full benefits of such a system. The major reasons for failure of performance management systems is poor design and implementation and general lack of political will. Considering the amount of money organisations spend on performance management systems especially on training, it is disheartening to see that most of them benefit nothing from such systems. Despite evidence that the systems do not add any value, we see organisations continuing to the implement the same systems in the wrong way yielding the same results: no value. I will outline below why most performance management systems are a waste of time and resources.
1. There is very little evidence in literature to support that an organisation can improve its performance by the introduction of a performance management system. Most organisations run without such system and they run very well. In the absence of evidence to show that the organisation’s performance improved after the introduction of a performance management system, it is then unwise for an organisation to just follow any performance management system. How do you assess if your performance management system is adding any value? The best way is to check the performance of your organisation before and after the introduction of a performance management system. If there is a significant difference in performance you have every reason to celebrate. In practice though most organisations know that their performance management system does not add any value.
2. There is a general obsession with the model being used, Balanced Scorecard, Results Based Management (RBM), amongst others. Models do not manage performance. What is needed is a system for setting clear goals for each employee and tracking progress easily. Constant feedback is a crucial component of a viable and value driven performance management system.
3. There is also very little evidence in the literature to support the fact that individual performance is related to organisation wide performance. In most organisations you find that most people are rated above average when the company is already on its knees. Surely if individuals in the organisation are performing their performance must have some connection to the overall success of the business.
4. Most performance management systems are so unreliable at measuring performance which makes the whole process a waste of resources. The people who are rated as good performers are normally not the good performers because other factors other than performance are assessed during the appraisal process.
5. There are so many factors that are outside the individual employee’s performance that impact on their performance. In some instances, performance goes up or down due to factors that have nothing to do with the employee effort. In such cases you will find the employee being given credit when performance goes up even if that upward movement was due to factors that had nothing to do with their own effort. The same applies when performance goes down, the employee is punished for a downward movement in performance that had nothing to do with them.
6. Most performance appraisal systems work like gambling systems. Performance that is attributed to the individual is more due to chance factors than individual effort. So the employee is basically gambling expecting a positive result depending on chance factors.
7. Some systems have very long forms and complicated processes for setting and reviewing performance. Such systems add zero value as most employees will complete the forms to fulfil a requirement not because there is any value addition. A good system must be easy to use without putting unnecessary burden on the people involved. A one page showing goals and targets to be achieved is what is ideal regardless of the role or level. Once your appraisal form is more than two pages you are unlikely to get any value out of it.
8. Regardless of what name you call it, your system must be centred on an easy goal setting process for the period under review. It must then be followed by an easy system of performance review. The two processes must be supported by an individual career development process that puts the individual at the centre of the performance management process including what benefits they are likely to drive from such a system.
9. A good system must have a mechanism for continuous evidence based feedback system. Most systems that I see on the market depend on formal appraisals done every quarter or once a year. That type of feedback is too infrequent to have significant impact on the performance of the individual employee. The appraisal ratings are not supported by any evidence.
10. A good performance management system has a consequence management system to support it. These do not necessarily need to be monetary. The key questions to answer are what happens when an employee performs? What happens if they do not perform? If the answer is nothing in both questions, the systems will not bring the desired results to the organisation or to the individual.
What should organisations do it order to gain value from a performance management system. Management must design simple systems centred on goal setting and frequent performance feedback mechanism. Do not worry about the name attached to the system. The name brings no value at all.
Memory Nguwi is an Occupational Psychologist, Data Scientist, Speaker, & Managing Consultant – Industrial Psychology Consultants (Pvt) Ltd a management and human resources consulting firm. https://www.linkedin.com/in/memorynguwi/ Phone 481946-48/481950/2900276/2900966 or email: firstname.lastname@example.org or visit our website at www.ipcconsultants.com